Conceived and born in different worlds: will the Energy White Paper be worth the wait?

Head of our Energy and Environment team Will McMyn discusses what might be covered in the anticipated energy white paper.

The government’s energy white paper has been a very long time coming.

It was first announced back in November 2018 by then Business Secretary Greg Clark when he made his “four principles” speech.

The speech was talked up in advance as the most important government statement on energy for years. But it left most industry people scratching their heads. Yes, it had been thoughtful and erudite, but it was very light on practical details. Perhaps, we mused, these would follow in the white paper that was promised “in the new year” (early 2019). 

But, said white paper has been repeatedly delayed, the victim initially of Brexit machinations consuming all government attention; then of a change of Prime Minister and BEIS Secretary (Andrea Leadsom); then of the December 2019 general election; then of another new Secretary of State (Alok Sharma) and, most recently, by the coronavirus crisis. 

There are mutterings, however, that at last the white paper might be about to see the light of day.

A lot has happened since that speech by Greg Clark. The UK has set in law a new target of net zero carbon emissions by 2050. The country has volunteered to host COP26 in Glasgow (now postponed to 2021 on account of COVID-19). Our energy system has continued to evolve, and the costs of newer technologies have continued to fall. The coronavirus pandemic – and the response to it by governments across the world - has raised big questions about the future of global economies, the energy systems that will power them, and the possibilities for a green recovery.

Given all the change, how much of Greg Clark’s original vision will remain in the white paper? Probably very little. Civil servants are, quite rightly, tight-lipped about the contents of the paper, but we can make some educated guesses about some of the issues it may touch on.  

Nuclear

The industry is at a critical point. Of the eight nuclear power stations currently operating in the UK, seven are due to close in the next ten years. New stations take many, many years to plan and build and only one, Hinkley Point C, is currently under construction.  Investors have walked away from projects at Wylfa and Moorside, put off by daunting project economics.

The white paper may tell us whether the government will adopt a new financial model (the so-called “Regulated Asset Base” - or “RAB” for short) to help get new stations built. Supporters of the RAB say that, by giving investors more certainty, it will allow nuclear projects to be financed more cheaply. Detractors point out that the RAB will shift the risk of cost overruns away from investors and onto billpayers.

The government has always insisted that nuclear is a vital part of the country’s future energy mix. But this mantra may be being challenged in Whitehall by ever-cheaper renewables; a smarter and more flexible grid which is seemingly at odds with huge nuclear stations pumping out baseload; and (with parallels to the Huawei saga in telecoms) by concerns about foreign involvement in critical national infrastructure.

Renewables

After a four-year block, the government changed its tune on onshore wind and solar in March, by declaring they would be allowed to compete again in contracts for difference (CfD) auctions.  But planning regulations in England still make the deployment of new wind and solar farms practically impossible (it’s a little easier in Scotland, Wales and Northern Ireland). So the white paper may signal future planning reforms to make them possible in England in appropriate places – though ministers will be hyper-sensitive to any accusation that they are allowing them to be forced on unwilling communities.

Offshore wind remains very much the renewables poster child as far as the government is concerned, so we may see further announcements focused on achieving the ambitious target of 40 GW of offshore wind capacity by 2030 (compared to about 8.5 GW operational today).

Decarbonisation of heat

This should feature prominently in the white paper, though more definitive statements may be left for the Heat Policy Roadmap which is due to be published at some point this year.

With 85% of British homes currently dependent on fossil gas for warmth and hot water, switching over to cleaner forms of heating over the next few decades will be one of the knottiest challenges to unravel if we are to achieve net zero. The government has been carefully keeping its options open while it gathers evidence to inform firmer decisions in the next few years.

This softly-softly approach, ministers would argue, reduces the likelihood of backing the wrong horse; but it also risks missing out on the chance to establish the UK as a global leader and seize opportunities in international markets for technology and expertise as countries around the world start to decarbonise their own heating.

Looking at hydrogen, for example, Japan published a national hydrogen strategy back in December 2017. Germany is expected to publish its equivalent soon. If the UK wants a decent-sized slice of this pie, it can’t afford to sit on the fence much longer.

Energy efficiency

The UK has some of the worst-insulated homes in Europe and the latest government proposals to update building standards for new homes have been widely panned as unambitious.

The Committee on Climate Change wrote to the UK and devolved governments recently encouraging them to align post-coronavirus economic stimulus with efforts to tackle climate change. Could the white paper propose new measures to encourage householders to upgrade their homes? Could we even see, as many have called for, a radical, systematic, street-by-street programme to retrofit homes with energy efficiency measures? Advocates point out that this could create thousands of jobs for years to come and the (considerable) upfront costs could, in theory, be met by lower future energy bills.

Energy retailing and consumers

While the consumer side of the energy industry is usually the most politically charged, this may be a relatively quiet area for the white paper.

The government’s flagship consumer intervention, the energy price cap, is due to remain in place till 2023. Concerns about lack of effective competition in the retail market have been partly eased by the steadily rising number of customers switching supplier over the last five years and energy users are currently benefiting from relatively low prices, which may have pushed consumer issues down the political agenda.

It’s a fascinating time for UK energy policy. Let’s hope the white paper will have been worth the wait.